Annual Report 2010 - Hannover Re

here, while the experience of our biometric risks of mortality and morbidity came in
somewhat below expectations. With an operating profit (EBIT) of EUR 284 million we
generated an EBIT margin of 6.1 percent; this is within the range of our target return.
Net income after tax was highly satisfactory at around EUR 220 million.
Our investment performance continues to be overshadowed by the low level of interest
rates. While this curtailed the investment income, we were able to book gains on
the sale of government bonds. During the second half of the year under review – in
accordance with our strategic asset allocation – we stepped up investments in corporate
bonds as part of our reinvestment activities. We increased the percentage share
of this asset class overall, while always paying close attention to the quality of debtors
and a broad spread of the risks. What is more, in the third quarter of 2010 we began
to move back into listed equity with a limited budget. At the end of the year under
review 2.1 percent of our investment portfolio was invested in this asset class – a
proportion that we plan to increase moderately during the current year. Thanks not
least to the continued highly positive cash flow from operating activities, our portfolio
of assets under own management grew by almost EUR 3 billion to more than
EUR 25 billion. This led to a pleasing increase of 8.6 percent in current investment
income. All in all, then, we generated income of EUR 943 million from the assets
under own management – a performance with which we are thoroughly satisfied.
Including deposit interest and expenses, net investment income rose by 12 percent
to EUR 1.3 billion.
The efforts that we have made over the past two years to tap into new business opportunities
in non-life reinsurance are bearing initial fruit. In cooperation with a partner
in the United States, for example, we launched a new insurance product on the market
designed to guarantee the energy savings promised by companies that make energyimproving
upgrades to buildings. In this way we are able to play our part in reducing
energy consumption and hence the emission of greenhouse gases. We are pleased to
report that we have already written business in this area.
Even though the trend towards softer markets in non-life reinsurance looks set to
continue in the current financial year, we expect to achieve a very good result for 2011.
In life and health reinsurance it is our expectation that the business written in past
6 Letter from the Chairman of the Executive Board
Hannover Re Group annual report 2010